The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq turned negative as well with only the Nasdaq remaining above its 50-day moving average.

The net result is we would be remiss in our disciple if we did not acknowledge the nature of the alteration in the charts that have now dimmed their previous positive implications.

Market Data

The data remain mostly neutral.

The one-day McClellan Overbought/Oversold Oscillators moved into oversold territory on the All Exchange and NYSE but remains neutral on the Nasdaq (All Exchange: -50.08 NYSE: -66.86 Nasdaq: -36.88).

The Open Insider Buy/Sell Ratio continue to be neutral at 56.1 as insiders remain evenly balanced between purchases and sales of their own stock as is the detrended Rydex Ratio (contrary indicator) +0.17 with the leveraged ETF traders riding the fence.

This week's AAII Bear/Bull Ratio (contrary indicators) at 48.9/26.37 continued to send a bullish message as the crowd has yet to embrace the market's strength from the March lows.

The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages is also neutral at 59.8%.

Valuation

Valuation continues to be our greatest concern with the S&P 500 trading at a P/E of 21.7x consensus forward 12-month earnings estimates from Bloomberg of $129.97 per share versus the "rule of 20" fair value multiple of 19.4x, suggesting the index remains overvalued.

The S&P's forward earnings yield is 4.61% with the 10-year Treasury yield at 0.65%.

Our Outlook

Given the shift in the chart picture, breadth deterioration and valuation juxtaposed with the data and sentiment readings, we are changing our near-term outlook to "neutral" from "neutral/positive" for the major equity indices.

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At the time of publication, Ortmann had no positions in any securities mentioned.

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